ProInsure - Business Insurance, Estate and Succession Planning

We blog on various topics but the heart of our practice is helping people with their daily challenges and problems and providing thoughtful solutions to these problems and challenges, whatever they might be.

  • Home
    Home This is where you can find all the blog posts throughout the site.
  • Categories
    Categories Displays a list of categories from this blog.
  • Tags
    Tags Displays a list of tags that have been used in the blog.
  • Bloggers
    Bloggers Search for your favorite blogger from this site.
  • Team Blogs
    Team Blogs Find your favorite team blogs here.
  • Login
    Login Login form

Selling a Business? Make it more attractive to buyers with key man insurance.

Posted by on in Business Insurance
  • Font size: Larger Smaller
  • Hits: 1196
  • 0 Comments
  • Subscribe to this entry
  • Print
  • Report this post

Buyers are more comfortable when the sellers have insured themselves properly. It shows the buyer that they are serious about selling the business.

 

There are many unforeseen events that can put a business sale at risk. Some are easier to manage than others. Key man insurance is a relatively easy and inexpensive way to take risk off the table.

 

Key man insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business; the ones whose absence would sink the company. These are the people the buyer wants to see insured.

 

Key man life insurance protects the buyer of a company during the transition phase where the seller stays with the company to consult and transfer good will.

 

Here's how key man insurance works: A company purchases a life insurance policy on the key employee, pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives the insurance payoff. The purpose of key man insurance is to help the company survive the blow of losing the person who makes the business work. The company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, fund purchase agreements and distribute money to investors. In a tragic situation, key man insurance gives the buyer some flexibility. The key man life insurance protection also protects the seller’s family and beneficiaries should the seller die in the middle of the deal.

 

How much key man insurance do you need? That depends on the business, but in general buyers like to see a replacement of two to four year’s wages. Term life insurance is an affordable solution.

 

If you are planning to sell your business make sure your liabilities are properly funded. Business Term Life insurance is one of the most cost-effective ways to fund the buy-sell portion of your shareholders agreement and to protect yourself and your key people when your business is for sale.

 

The proper use of business key man insurance makes your business more attractive to potential buyers and separates it from the competition.

0

Comments

  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest
Guest Wednesday, 26 April 2017

Blog Archive

January
February
March
April
May
June
July
August
September
November
January
February
March
April
September
October
December

Blog List

Free Quotes - No obligation

Your Name
Please let us know your name.

Your Email
Please let us know your email address.

Message
Please let us know your message.

Spam control(*)
Spam control
Invalid Input

Copyright © 2017. ProInsure - Business Insurance, Employee Benefits and Succession Advisors. Designed by Shape5.com Joomla Templates